Tens of millions of pounds are being wasted because the Ministry of Defence continues to recruit "child soldiers" who are more likely to quit the armed forces.
Soldiers under the age of 18 are also being jailed for going absent without leave, despite a policy which gives commanding officers the discretion to discharge "unhappy juniors", the Coalition to Stop the Use of Child Soldiers said.
The UK is one of fewer than 20 states, including Iran, North Korea and Zimbabwe, which still recruit 16-year-olds into the armed forces.
The campaign group, which wants the Government to raise the recruitment age to 18, said it was not right that young recruits could be sent to the front line on reaching the age of 18 on the basis on an enlistment contract signed at the age of 16 or 17.
The report noted that last year 27 per cent of under-18 recruits dropped out of initial training, against an average of 18 per cent across all age groups.
And of the 4,675 16- and 17-year-olds who joined the armed forces, 1,485 (32 per cent) left the same year. There was also a spike for personnel discharged at the age of 22.
Under-18s have a right of discharge at the end of the first month of training and before six months have elapsed since enlistment, but after this cooling-off period 22 is the first point they can end their contract.
Based on recruitment and training costs for an infantryman of £31,000, the campaign group calculated that about £46m was spent on the 1,485 under-18s who left the armed forces in 2010.
The report said there was no ongoing right of discharge for under-18s but recruits could ask for a discharge through the "unhappy juniors" provision, which grants their commanding officers discretionary power if they believe that the teenager is clearly unhappy.
The MoD says it is "exceedingly rare" for any young recruit to be refused permission to leave and it is unaware of any cases where somebody under 18 has been unable to do so. But the campaign group said while all discharges are recorded, refused discharges are not.
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